Trust: A pillar of a successful digital revolution

Digitalisation is transforming our lives. But a new Swiss Re Institute (SRI) report suggests it has yet to yield the vast productivity gains some had predicted or may have expected. The lesson here is that even the most promising technologies need the right conditions to reach their potential. To aid this process, focused efforts to build trust in digitalisation can help re/insurers make the most of the latest tech revolution.

Swiss Re's London offices are a short ride from St. Mary's Hospital where Alexander Fleming discovered penicillin – famously, by accident – in 1928. Less known is that this medical breakthrough took years to make an impact: First, Fleming's discovery failed to capture much interest; later, he concluded production was almost impossible. Another team eventually took up the mantle, but it wasn't until 1942 before penicillin began saving people's lives.

The history of antibiotics shows how a revolution we now take for granted was no instant success. It took more than a decade for the era's visionaries to assemble the essential elements necessary for it to begin delivering on its promise. For me, this story adds perspective to challenges we now face in taking full advantage of the technological revolution of our own generation: digitalisation.

Of course, digitalisation has fueled big changes. It has transformed shopping and global supply chains. The banking industry will never be the same. In many ways, digitalisation has brought the planet's 8 billion people closer together. And it's reshaped parts of the re/insurance industry, too, creating opportunities to collect, analyse and leverage risk data so we and our clients can make better decisions.

Still, one compelling conclusion of SRI latest sigma publication, "The economics of digitalisation in insurance: new risks, new solutions, new efficiencies", is that labour productivity gains over the past two decades have actually been pretty lacklustre, despite this being a period in which digital technologies that promised greater efficiency were adopted nearly everywhere.

The SRI team behind the sigma report calls this "the productivity paradox". They cite some complex reasons behind it, and there's much debate over its significance. Some conclude it may simply take more time – much as penicillin did after Fleming stumbled upon it -- before the dividends of digitalisation achieve critical mass and spark the next wave of productivity gains.  

In fact, we may be approaching that point. After years on the horizon, for instance, artificial intelligence and machine learning are enjoying what you might call "a moment." They are quickly becoming valuable, efficiency-boosting tools across a variety of industries including re/insurance, even as people debate what this means for society.

At Swiss Re, we are also examining these technologies' potential and in some instances deploying them, since we see real-world use cases to drive our business forward. Benefits range from reducing claims processing costs, improving loss ratios, detecting fraud, streamlining marketing and strengthening distribution to customers, including groups our industry has long struggled to reach.

The sigma highlights the building blocks of digitalisation that can help insurers reap the benefits from these advances. For instance, South Korea, Sweden and Finland all score high in the SRI Insurance Digitalisation Index, as they get a boost from factors including strong research & development spending and digital connectivity.

Markets including India, Mexico and Italy are ranked lower, but have the potential to catch up quickly by addressing key areas important for digitalisation to succeed, such as expanding the number of insurance policies available online or boosting the reach of mobile broadband. But one important insight from our report is that regardless of where countries are on their digitalisation journeys, there's room for improvement everywhere.

From my perspective at Swiss Re, where I lead the business unit that includes Reinsurance Solutions for both P&C and L&H insurers as well as our B2B2C digital insurer iptiQ, I see another slightly less tangible area where our industry should focus its attention to help accelerate the adoption of productivity-boosting digital technology: We should look to build digital trust.

Swiss Re has long recognised making the most of new technology requires winning confidence of our customers and policyholders. These groups must remain the ultimate beneficiaries of digitalisation. I've written before about how mistrust of technologies can impede progress. That's why establishing trust in new digital technologies is a priority for me and my colleagues.

This means informing and reassuring people that biases have been eliminated from our algorithms. Our stakeholders, from insurance consumers to regulators, are keen to know what we're doing with information we collect. Trust soars when we prioritise transparency and explainability.

At Swiss Re, we're supporting multilateral efforts like the Digital Trust Label in Switzerland, a first-of-its-kind effort aimed at helping organisations convey their commitment to digital trust. Without this, the benefits of new technology will accrue more slowly. When trust is strong, however, digitalisation can fulfill its productivity-boosting role for our clients and their customers as they look to manage ever-more-complex risks more efficiently.

When I sit with clients, we discuss their wide-ranging concerns, from macroeconomic uncertainty and geopolitical risks to extreme weather and insurance consumers' physical or mental health challenges. They want better digital tools with which they can take leverage increasing volumes of data to guide risk mitigation and adaptation strategies.

With Swiss Re's Rapid Damage Assessment (RDA) platform, for instance, our AI-enabled models evaluate post-event satellite and drone imagery to determine damage severity, helping prioritise inspections to accelerate claims adjustment and payments. And for L&H insurers, Swiss Re's Data Driven Underwriting initiatives including Underwriting Ease and Digital Health Underwriting are aimed at enabling customers to further digitise their underwriting processes through the effective utilisation of alternative data in their risk assessments.

A century ago, mankind faced the challenge of life-threatening infections that required nothing less than the antibiotics revolution. As the story of penicillin illustrates, however, it took time before people began reaping its life-changing benefits. The right conditions needed to be in place first.

Re/insurers today face their own challenge: Closing the USD 1.8 billion global protection insurance gap for unprotected P&C and L&H exposures. Digitalisation promises to help us close this gap, but building trust is an essential condition for success, and we can't wait.